Farmers Home Administration: Debt Relief Actions for Business Entity Borrowers Are Questionable
RCED-92-29
Published: Dec 10, 1991. Publicly Released: Jan 10, 1992.
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Highlights
Pursuant to a congressional request, GAO reviewed the Farmers Home Administration's (FmHA) implementation of the debt restructuring provisions of the Agricultural Credit Act of 1987, focusing on: (1) how the provisions relate to borrowers that are business entities; (2) how FmHA county offices implemented the agency's April 1989 guidance; and (3) whether FmHA used the April 1989 guidance to recalculate the amount of debt relief provided to borrowers prior to the issuance of the guidance in order to minimize the government's losses in debt relief actions.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, FmHA, to issue guidance emphasizing the necessity of obtaining complete personal financial statements from all individual cosigners of business entity loans requesting debt relief and of verifying the accuracy of the information, particularly nonfarm income, assets, liabilities, and expenses. Sources for verification could include credit reports, tax information, and record checks at local banks and county courthouses. |
In February 1992, FmHA issued guidance (AN No. 2482) to its field offices concerning debt write-down and write-off decisions for business entity borrowers. The agency guidance emphasized the need to obtain personal financial statements from all individual cosigners and to verify the accuracy of the information.
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| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, FmHA, to specify which personal assets and income county offices should consider in providing debt relief to business entity borrowers. |
In April 1992, FmHA issued its revised loan servicing regulations which included a provision to consider all of the borrower's assets in providing debt relief.
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| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, FmHA, to require FmHA county offices to review prior debt write-down and write-off decisions for business entity borrowers, identify those decisions in error, and pursue recourse when errors are identified. FmHA may want to consider the potential recovery amount in deciding whether to pursue recovery. |
The agency requested that its state directors review the files of 710 entity borrowers who received debt writedown or writeoff decisions. FmHA state directors identified 21 business entity debt relief cases needing corrective action. Corrective action has been taken.
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Agricultural programsBusiness assistanceDebtDebt collectionDelinquent loansFarm creditFarm subsidiesFederal regulationsGovernment collectionsNoncompliance